CWA/ICWA Inter :: Advanced Financial Accounting : December 2002

I—10(AFA)
Revised Syllabus

Time Allowed : 3 Hours Full Marks : 100
Attempt Question No. 1 which is compulsory and any five from the rest.
Marks
1.
(a)

A going concern is one, which has not contemplated going into liquidation even in the remotest future all the time of preparing its latest financial statements. True or False.

(b)Link-up the items with appropriate Accounting system.
ItemAccounting System
(i)Money at Call and Short noticeInsurance Accounts
(ii)Balance at Marine FundBank Accounts
(iii)General Balance SheetCompany Accounts
(iv)Calls-in-Arrear A/cDouble Accounting System.
(c)State two reasons for which a Trial Balance does not agree.
(d)State how Profits prior to Incorporation is treated in Accounts.
(e)Two types of errors do not affect the agreement of a Trial Balance. — Mention names clearly.
(f)Name four concepts on which Financial Accounting is founded.
(g)How are the following Items treated while preparing the Income & Expenditure a/c and Balance Sheet?
(i)Legacies
(ii)Donation for specific purposes.
(h)How Loss due to Short Sales is calculated in connection with Loss of Profits policy?
(i)

In respect of a Dependent Branch, a Head Office may follow any of the four methods of Accounting. Name these clearly.

(j)Mention any two purposes for which Share Premium Account can be utilised.
2x10
2. The following are the summarised Balance Sheets of H. Ltd and S. Ltd as at 31st December, 2001. 16
Liabilities     H LtdS LtdAssets     H LtdS Ltd
Share Capital
Reserves
Balance of P & L a/c as on 1.1.01
Profit & Loss a/c for the year
Creditors
200,000
30,000
60,000
40,000
100,000
50,000
10,000
30,000
10,000
30,000
Sundry Assets
Share in S. Ltd
Cash at Bank
180,000
230,000
20,000
120,000

10,000
430,000130,000430,000130,000
H Ltd. acquired 80% of the Shares in S. Ltd. On 1st July 2001 included in the Assets of H. Ltd., there is Rs. 30,000 Loan to S Ltd. Shown as creditors in S. Ltd. Sundry Assets of S Ltd. include furniture & fittings of Rs. 40,000 to be revalued at Rs. 50,000 being over depreciated as at 31st July, 2001. Prepare Consolidated Balance Sheet of H Ltd. as at 31st December, 2001.
3. PBX Co. Ltd. have three ledgers — Debtor's Ledger, Creditor's Ledger and General Ledger which are kept under Seft-balancing system.
From the following particulars, prepare the relevant Adjustment Accounts that would appear in each of the Ledger:
16
Rs.
Debtor's balance (1.4.2001)
(Dr.)
(Cr.)
Creditor's balance (1.4.2001) (Dr.)
(Cr.)
Purchase (Including Cash Rs. 4,500)
Sales (Including cash Rs. 5,000)
Cash paid to Creditors
Collection from Debtors
Discount Allowed
Discount Received
Returns Inward
Returns Outwards
Bills Payable Accepted
Bills Receivable Drawn
Bills Dishonoured
Bills Discounted
Bills Endorsed
Bills as Endorsed Dishonored
Bad Debts
Provision for Bad Debts
Transfer from Debtor's Ledger
Transfer to Creditor's ledger
Debtor's Balances as on 31.03.2002 (Cr.)
Creditor's Balance as on 31.03.2002 (Dr.)

20,000
6,000
4,500
16,800
38,000
77,000
21,000
62,000
260
320
2,400
1,500
4,000
7,500
2,000
1,500
4,000
1,000
800
2,500
500
500
300
200
Please turn over
 
( 2 )
I—10(AFA)
Revised syllabus
Marks
4. From the following information, prepare:- 16
(a) Reconcillation of Head Office Account in Branch Books and of the Brach Account in the Head Office, Books; and
(b) The Trading and Profit & Loss Account of the Head Office — for the year ended 31st December, 2001.
Head Office
    Rs.
Branch
Rs.
Opening Stock
Purchses
Sales
Other Expenses
Closing Stock
10,000
115,000
205,000
15,200
5,200
4,500

155,000
6,200
3,100
The Branch books show the Head Office Account at Rs. 9,000 (Cr.) and the Head Office books show the Branch Account at Rs. 24,000 (Dr.). The Branch receives all its supplies from the Head Office, which are Invoiced at 25% over cost; During the year, the Head Office sent Invoices to the Branch to the tune of Rs. 1,04,500. The Head Office credits Its Sales Account with the Invoice price of the goods sent to the Branch.
The Head Office billed the Branch for Rs. 12,000 on 31st December 2001 representing the Branch's share of the expenses Incurred by the Head Office. The said expenses had not been recorded in the books of the Branch.
The expenses of the Branch are met by the Head Office from time to time for which amounts are sent in advance to the Branch. A sum of Rs. 3,000 sent to the Branch by the Head Office on 29th December, 2001 in this connection, was received by the Branch on 3rd January, 2002.
5. The business of Rundown Ltd. was being carried on continuously at losses. The following are the extracts from the Balance Sheet of the company as on 31st March 2002: 16
LiabilitiesRs.Assets     Rs.
Authorised, issued and subscribed capital:
30,000 equity shares of Rs. 10 each fully paid
2,000 8% Cum, Pref. Shares of Rs. 100 each fully paid
Share premium
Unsecured Loan (from Director)
Sundry Creditors
Outstanding Expenses (including Directors
remuineration - Rs. 20,000)

3,00,000
200,000
90,000
50,000
300,000

70,000
Goodwill
Plant
Loss Tools
Debtors
Stock
Cash
Bank
Preliminary Expenses
P & L Account
50,000
300,000
10,000
250,000
150,000
10,000
35,000
5,000
200,000
1,010,0001,010,000
Note: Dividends on Cum. Pref. Shares are in arrears for three years.
The following scheme of reconstruction has been agreed upon and duly approved by the court: <
(1)Equity shares to be converted into 1,50,000 shares of Rs. 2 each.
(2)Equity shareholders to surrender to the company 90% of their holding.
(3)Pref. shareholders agree to forego their rights to arrear dividends in consideration of which 8%. Pref. Shares are to be converted into 9% Pref. Shares.
(4)Sundry creditors agree to reduce their claim by one-fifth in consideration of their getting shares of Rs. 35,000 out of the surrendered Equity Shares.
(5)Directors agree to forego the amounts due on account of Unsecured Loan and Directors remuneration.
(6)Surrendered Shares not otherwise utilised to be cancelled.
(7)Assets to be reduced as under:
Goodwill
Plant
Tools
Sundry Debtors
Stock
by
by
by
by
by
Rs.
Rs.
Rs.
Rs.
Rs.
50,000
40,000
8,000
15,000
20,000
(8)Any surplus after meeting the losses should be utilised in writing down the value of the plant further.
(9)Expenses of reconstruction amounted to Rs. 10,000.
(10)Further 50,000 Equity Shares were issued to the existing members for increasing the working capital. The issue was fully subscribed and paid up.
(11)Authorised, capital was suitably increased.
A member, holding 100 Equity Shares opposed the Scheme and his shares were taken over by a Director on payment of Rs. 1,000 as faced by the court.
You are required to pass the Journal Entries for giving effect to the above arrangement and also to draw up the resultant Balance Sheet of the Company.
 
( 3 )
I—10(AFA)
Revised syllabus
Marks
6. On 1st January 200, RAMAN Ltd. wants to implement its programme of expansion but finds that there is a short of funds. On 1st January, 2001, it had a balance in Bank – Rs. 1,80,000. 16
From the following information, prepare a statement for Board of Directors to show how the overdraft of Rs. 68,750 as at 31st December, 2001, has arisen.
Figures as per balance Sheet as at 31st December each year are as follows:
Year
2000
Rs.
Year
2001
Rs.
Fixed assets
Stock & Stores
Sundry Debtors
Bank Balance
Trade Creditors
Share Capital (in shares of Rs. 10 each)
Bills receivable
750,000
220,000
350,000
180,000
270,000
250,000
87,500
1,120,000
330,000
335,000
68,750
350,000
300,000
95,000
(OD)
The profit for the year ended 31st December 2001 before charging depreciation and taxation amounted to Rs. 2,40,000.
5,000 shares were issued on 1st January 2001 at a Premium of Rs. 5 per share.
Rs. 1,37,500 were paid in March 2001 by way of Income Tax.
Dividends were paid as follows:-
For 2000 (Final) on the capital on 31.12.2000 at 10% less tax at 25%.
For 2001 (intering) 5%, Free of Tax.
7. The Trading Account of M/s Abraham & Co. for the year ending 31st March, 2001 is given below. 16
Rs.     Rs.
To Opening Stock
To Purchases less Returns
To Gross Profit c/d
68,480
156,940
29,400
By Sales Less Returns
By Closing Stock
196,000
58,820
254,820254,820
A fire occurred in their godown which was situated behind their office premises, on 31st December, 2001. A considerable part of the stock of ready-made garments was destroyed by fire. The salvaged stock realised for Rs. 2,255. The stocks and the premises were fully insured against fire risks.
Considering the following further particulars, prepare a statement showing the amount of claim to be lodged by M/s Abraham & Co. with the Great India Insurance Company Ltd. for the loss of stock only.
Sales for the period ending 31st December, 2001 were Rs. 1,09,200. The amount paid for the purchases was Rs. 88,016 including a cheque for Rs. 562 which was not presented to the bankers up to 31.12.2001.
As shown by the books of account. Trade creditors on 31.3.2001 amounted to Rs. 24,608 and on 31st December, 2001 were Rs. 22,112. Goods worth Rs. 6,390 were returned to creditors during the period ending 31st December, 2001. Working shall be treated as part of your answer.
8. (a) Write Short notes on:-
(i)Public Account;
(ii)Contingency Fund.
4x2=8
(b)
(i)Describe with reference to Accounting Standard 7 on Accounting for construction contracts, the methods which may be used for recognising revenue on construction contracts.
(ii)Briefly explain the objective and scope of Accounting for the effects of changes in Foreign Exchange rates — AS. 11.
4x2=8

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